Intrepid Capital Management May 31 st , 2015
Our Firm Intrepid Capital offers investors a truly Global Access across Developed, Emerging and Frontier Markets. It is a Cayman-Island Based independent financial services firm established in 2012. Exceptional Track Record Superior Investment Portfolio Global Mandate Our team has generate 17% Our flagship fund’s average portfolio Investing Globally across all company annualized returns over the past 6.5 company trades at PE < 9 and sizes and countries allows us access years, outpacing all of developed, EV/EBITDA < 5, while also offering to a wider range of market emerging and frontier market higher dividend yields, free cash flow inefficiencies and asset mispricings. indices, with only 1 annual loss and Returns on Capital compared to We inevitably achieve low exposure period. benchmarks. to expensive markets. Diversified Experience Strong Sponsors Intrepid Capital Professionals have The Directors come from one of the had combined 30 years experience in most prominent business families in Investment Banking, Private Equity, the GCC. They have seeded the fund Asset Management, Equity with $5 million, after seeing the Brokerage across North America, success of the Investment Team in Europe, Middle East and South Asia managing the Group Portfolio
Fund Directors • Ajlan Abdulaziz Al Ajlan • Mohammed Abdul Aziz Al Ajlan • Fahad Abdulaziz Al Ajlan
Investment Team Imran Salahuddin CFA Usman Farooqui CFA Chief Investment Officer Investment Manager Imran has more than 20 years’ experience in the Usman has nearly 10 years experience in the financial financial markets having worked in various roles in markets, having worked in roles in both sell side Investment banking, private equity and asset brokerage and asset management in the Middle East management in North America, Europe, the Middle and South Asia. He is currently ‘Investment Manager’ East and South Asia. He is currently the chief of the Ajlan & Bros Group and is part of the team that investment officer of the Ajlan & Bros Group and actively manages a global public equity portfolio and oversees the investment holdings of the Company in oversees group investments in Private equity, Hedge global public equities, private equity and hedge funds and Real estate. Usman has previously served funds, direct private equity and U.S. real estate. He as head of Equity research and vice president of the has prior work experience with Samba Capital, Samba International Equity Sales for Alfalah Securities. He is Financial Group, ABN AMRO Asset Management, an avid writer on economics, investment and finance Mirant Corporation, ABN AMRO Bank and KASB topics and contributes as a columnist for the ‘Express Securities. He actively follows the global investment Tribune’ newspaper, an affiliate of the ‘International scene and is an avid follower of some of the best Herald Tribune’. He has a BSc Economics degree from value investors. He has an MBA in finance from Yale Lahore University of Management Sciences (LUMS). University and BA in Economics from Oberlin College. He has also completed 2 parts of UK-based Association of Chartered Certified Accountants (ACCA) program and stood first in one of the papers among nearly 9,000 students. Usman also won the J.W. Fulbright Scholarship to study Masters Finance (MSc) at Boston College.
6-year Track Record – Managed Accounts • Investment team has Managed a USD 35mn internal public equity portfolio for Ajlan Bros Group since 2009. • Performance includes average cash balance of 17%, maintained to exploit sudden market movements. • 6-year Performance Record (2009-2014) reviewed by KPMG . Report available on request Performance Return (USD) 2009 2010 2011 2012 2013 2014 Annualized Ajlan Group Portfolio 34.8% 16.4% -12.0% 28.2% 20.1% 21.0% 17.1% MSCI World (Developed Markets) 27.0% 9.6% -7.6% 13.2% 24.1% 2.9% 10.9% MSCI Emerging 74.4% 16.3% -20.4% 15.1% -5.0% -4.6% 9.1% MSCI Frontier 7.0% 18.8% -22.0% 4.7% 21.4% 2.9% 4.4% Saudi Tadawul 27.4% 8.1% -3.1% 6.0% 25.5% -2.4% 9.6% S&P Total Return 26.5% 15.0% 2.1% 16.0% 32.3% 13.7% 17.2%
Intrepid Global Opportunities Fund • Flagship Fund of Intrepid Capital Management. Launched on October 1 st , 2014 • Focus: Long Equities (stocks), but can also Short and Invest in Debt Securities. • Geography: Access to more than 60 Country Stock Markets and adding over time. • Target Returns: 15% p.a (net of fees) • Concentration: Top 10 holdings - 40%, Bottom 30-50 holdings - 60% • Leverage: None HOLDINGS BY COUNTRY - MAY 31 ST , 2015
Fund Performance The Fund’s Investment Performance has been far superior to major benchmark indices. We expected this after a proven 6-year track record of following the same strategy. Period Intrepid MSCI World MSCI MSCI Global Emerging Frontier 2015 May 5.5% 0% -4.1% -4.1% 2015 YTD 19.1% 4.1% 5.0% -5.2% Since Oct 1 2014 12.8% 4.7% -0.3% -17.3% (inception)
Investment Philosophy - Value Investing • Perform valuation and buy cheap • Hold as long as its cheap (few months to years) • Sell when stock gets to fair value • Repeat the process •
Investment Framework Typical Investment Risk Features of Process Management Investments Stock Screening Stock Screening PE < 9, EV/EBITDA <5 PE < 10 <7% in single stock <15% in single Frontier High Return on Capital Company Research Market country Dividends / Buybacks <20% in single industry Industry / Macro Analysis Long-term Earnings Hold Cash when Growth Investment Thesis opportunities fail to Debates meet our criteria. Discount to Asset Value Proprietary Low Overall Portfolio Evaluation Model Valuation Insider Owners Avoiding Companies we Daily Monitoring of Little to no debt on do not understand. Company News Balance Sheet
Current Market Opportunities China / Hong Kong: (37% or our Portfolio) • Current weakness in Chinese Real Estate Market are creating unprecedented buying opportunities in Hong Kong listed Chinese companies, with strong domestic presence or exports prowess. • The Shanghai Index is up 140% over the past 12 months, but the Hang Seng (Hong Kong) is up only 20%. We think this valuation Gap has to narrow with HK index trading at PE of just 11, compared to 25 for Shanghai. Big Emerging Markets: • Markets like India, Indonesia, Thailand, South Korea, Russia etc. have large number of small to medium size listed companies which are usually ignored by Global Investors and so are fertile source of hidden gems. Frontier Markets • Due to history of economic-political instability eg. Egypt, Pakistan, Vietnam, Sri Lanka usually offer quality businesses with earnings growth and good management at cheap valuations.
Strategies Sample Picks Strategies CORE Peripheral 1 Peripheral 2 Growing Companies at Companies trading at big Quality Companies at Cheap Valuations discount Balance Sheet Assets Reasonable Prices Nozha Hospital Keck Seng Investments Dubai Refreshments Market Cap (USD mn) 20 335 502 Price Earnings 7.8 9.9 12.8 5 yr Operating Income CAGR 35% 11% 34% Return on Core Equity 45% 14% 22% Dividend Yield 3.2% 2.0% 3.1% Price / Book 2.1 0.7 2.2 Excess Cash + Investments (USD mn) 5 180 54 Busy Hospital Catering to Owns and Operates global Sole Pepsi Distributor in mid-to-low market in Cairo, franchise hotels in US, Japan, Dubai and the Northern Business Model mainly insurance customers China, Canada, etc. Emirates Our typical holding. Growth Trading at 30% discount to Coke and Pepsi Bottlers trade with Good Return on NAV. Quality Assets such as at 17 PE and above. Capacity Investment Thesis Capital W Hotel in San Francisco. about to triple by year end.
Fund – Summary of Terms • 0% Management Fees – We get paid only when our investors make money • We recommend investors to invest a minimum of 3 years to gain benefit from our strategy • The Directors have seeded the fund with $5mn Structure Cayman Island Open-ended Fund for non-US and US tax exempt investors Base Currrency USD Minimum Subscription $100,000 Fiscal Year Dec 31st Subscription Fee 0.75%, payable on first and any subsequent subscriptions Management Fee 0% Incentive Fee 18% of net realized and unrealized appreciation, payable quarterly Hurdle High Watermark Withdrawals Quarter-end redemption, with 20 business days notice. Prime Broker / Custodian HSBC Private Bank (Suisse) Outside Auditor KPMG Legal Counsel Campbells Fund Administrator APEX fund Services Pricing Independent Quarterly Pricing by APEX
Best Practices, Compliance & Safeguards • Detailed Monthly Investment Letters • Third-Party Pricing and Fund Accounting • Directors have substantial capital invested alongside investors. • Independent qualified custodians - HSBC Private Bank • Experienced managers focused on day-to-day running of business. • Registered with Cayman Islands Monetary Authority and USA FACTA Regulations • Annual Audit by KPMG • Pricing Verification • Prime Brokers – HSBC Private Bank • Independent Administrator – APEX Fund Services • Independent Fund Administrator • Reconciles Cash and positions daily with Prime Brokers • Pricing and Fund Accounting • Anti money-laundering checks
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